47-5109. Fraud and forgery
A. If a presentation is made that appears on its face strictly to comply with the
terms and conditions of the letter of credit, but a required document is forged or
materially fraudulent, or honor of the presentation would facilitate a material fraud by
the beneficiary on the issuer or applicant:
1. The issuer shall honor the presentation, if honor is demanded by a nominated
person who has given value in good faith and without notice of forgery or material fraud,
a confirmer who has honored its confirmation in good faith, a holder in due course of a
draft drawn under the letter of credit that was taken after acceptance by the issuer or
nominated person, or an assignee of the issuer's or nominated person's deferred
obligation that was taken for value and without notice of forgery or material fraud after
the obligation was incurred by the issuer or nominated person; and
2. The issuer, acting in good faith, may honor or dishonor the presentation in any
other case.
B. If an applicant claims that a required document is forged or materially
fraudulent or that honor of the presentation would facilitate a material fraud by the
beneficiary on the issuer or applicant, a court of competent jurisdiction may temporarily
or permanently enjoin the issuer from honoring a presentation or grant similar relief
against the issuer or other persons only if the court finds that:
1. The relief is not prohibited under the law applicable to an accepted draft or
deferred obligation incurred by the issuer;
2. A beneficiary, issuer or nominated person who may be adversely affected is
adequately protected against loss that it may suffer because the relief is granted;
3. All of the conditions to entitle a person to the relief under the law of this
state have been met; and
4. On the basis of the information submitted to the court, the applicant is more
likely than not to succeed under its claim of forgery or material fraud and the person
demanding honor does not qualify for protection under subsection A, paragraph 1.
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